A blog that takes the reader through the principles of Lean Management and Six Sigma in a practical way. The ultimate goal is to help the medical practice to meet its goal of becoming more efficient in providing care and meeting the patients needs. | Contact Owen Dahl at 832-260-4455 or at his website OwenDahlConsulting.com

Thursday, September 3, 2015

How About Getting Long-Timers Disease? ICD-10 and Cash Flow

The medical practice world is built on a cash basis accounting system. Cash comes it, it is recorded as income, cash goes out it is recorded as an expense. At the end of the year we take all income out so we don’t have to pay corporate taxes. This creates a void in looking at new investments.

I hate to pay taxes like anyone else except for what I owe to make sure that I get the benefits that I need and deserve, I know we could get into a long discussion about this idea! But that’s not the point. The point is that things are changing and it may be beneficial to think about a long term strategy and long term investment into our business model.

An independent practice can consider switching to an accrual based accounting strategy. We book activities when they occur rather than when they are paid for. If we manage the revenue cycle well, we will know what is coming in and that it is coming in timely, e.g., our days in accounts receivable is less than 30 days. We effectively manage our inventory. Our tax burden is controllable.

Now is a great time to think about this strategy for 2016. Why? Because the ICD-10 conversion will occur in October! I suggest that cash planning for 2015 include NO bonus or significant cash out at year end! It’s not that you will have a problem with managing the change! Half a joke! It’s that the payer is on the other side. So the recommendation is to plan on normal cash in October, but very little in November and December. Plan on cash infusion in January.

Therefore, it you were to start a new program, purchase new equipment, renovate the office, or make some change it should occur in 2016. You may also then elect to move to an accrual based accounting strategy as of January 1, 2016. You then can consider the future with a solid long term investment strategy rather than a year-to-year model.

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About Me

Owen J. Dahl, MBA, FACHE, LSSMBB, has been active in healthcare management for almost 40 years. He received his bachelor’s degree from Concordia College, Moorhead, Minnesota, where he was a member of the first graduating class in the hospital administration program. He then spent more than a decade as a hospital administrator in various facilities in South Dakota. He also served in the United States Air Force.

His move to New Orleans in 1983 brought a major career change. He started a practice management and billing company, which grew to manage 65 physicians in 11 different practices with revenues well over $75 million. In 1993, he advanced to Fellow in the American College of Healthcare Executives with a paper on Total Quality Management and its application to the medical practice. He also received the distinction of becoming the first non-physician member of the Orleans Parish Medical Services Bureau Board of Directors.

Throughout his career, Owen has maintained a passion for education. He developed an adult continuing education program with Loyola University of New Orleans in physician practice management. He also is the original developer of the certification program for the Professional Association of Health Care Office Managers (PAHCOM) and the Institute of Certified Healthcare Business Consultants (ICHBC). The Institute program is currently available online through the National Society of Certified Healthcare Business Consultants (NSCHBC). He has worked with the Louisiana State University Medical School Department of Graduate Medical Education conducting seminars for students, residents, and fellows in physician practice management.